RE: Bankruptcy B808723

This time-line/synopsis concerns some of the evidence and legal issues the Official Assignee of New Zealand considered in my bankruptcy over a relatively small debt owed to the executors of my mother’s estate.

The purpose of this summary is to promote codification of the law relating to set-off of mutual credit/debt between an executor and legatee of an estate. The bankruptcy itself was not subject to the full appellate process due to my inability to persuade the court that I could provide security for court costs.

The bankruptcy was completely unnecessary and simply a legal tactic by the executors to avoid solemn probate and the proper legal consequences of their actions.

“The beneficiaries right to an impartial trustee is paramount” – NZ Court of Appeal.

“The first principle of English Law is that it makes business for itself-“ Charles Dickens

Background

1. In Dec 2001 my sister Janine Creser (hereinafter the “trustee”) began exercising an enduring power of attorney in respect of my late mother’s estate and welfare.

2. The trustee informed my mother that I had numerous creditors and tried to persuade her to disinherit me entirely. In March 2002, my mother changed her will from an outright gift to a protective trust to protect me from bankruptcy and numerous creditors that she had been persuaded to believe were waiting to consume my inheritance.

3. After my mother’s death in March 2003, I took an action seeking financial disclosure and the removal of the trustee.

4. I signed a lien for $20,000 against my share of the estate to cover my costs of solemn probate as estimated by the solicitors acting for the estate. The lien is clear proof that the trustee and her solicitors were aware of my equitable interest in the estate.

5. I succeeded in my application seeking disclosure of my mother’s medical records and obtained an order requiring the trustee to prove the will by making an application for solemn probate. However the court refused to order financial disclosure and costs were awarded against me.

6. Because I was self-represented, no reciprocal costs were awarded in respect of my successful applications and the trustee, acting alone then filed a bankruptcy petition to avoid having to apply for solemn probate. Solicitors for the trustee acknowledged they were able to wait until probate to collect the debt.

7. My son and I retrieved recycling from the curbside at 6 Caroline St that showed a maintenance account inflated by $1000. A note to the trustee from Mr Ross Mainland was recovered and stated “Janine I have padded the bill by $1000 of which you paid me $200 Ross”

8. Subsequent examination of the rubbish from the property revealed that the original account was made out to my mother. This occurred while the trustee was exercising the E.P.O.A and only months before my mother died.

9. One possible charge relating to the falsification of accounts concerns section 6 of the Secret Commissions Act 1910

“ Giving false receipt, invoice, etc., to agent an offence
Every person is guilty of an offence who, with intent to deceive the principal, gives to any agent, or signs or otherwise authenticates for the use of any agent, any receipt, invoice, account, or other document of any nature whatsoever in relation to the affairs or business of the agent or his principal which contains any statement which is false, defective, or misleading in any material particular, or which omits to state explicitly and fully the fact of any commission, percentage, bonus, discount, rebate, repayment, gratuity, or deduction having been made, given, or allowed, or agreed to be made, given, or allowed, in relation to the matters referred to in that document.”


10. To support the allegation that the trustee was dishonest and unfit to act as as fiduciary, I provided the Official Assignee with over 300 documents confirming that the trustee and her partner, Mr Andrew Lyttle had defrauded the Dept of Social Welfare/Work & Income for over 20 years.

11. The text of one letter written by the trustee is as follows “Could you please post any social welfare correspondence to me enclosed in another envelope as addressing the envelopes often results in my Hokianga address being superimposed on correspondence-as carbon paper is used. Enclosed are some 40c stamps. This social welfare crackdown sounds like it is mainly to apprehend people on the dole who are working full time as well-but as I am officially living in Wellington, this should be no problem about me & Andy living in happy sin in the far north. As usual-if you get contacted at all- I do live at Caroline St but am on holiday. You could then inform me. Its unlikely to happen-DPB & dole people are the people targeted for prosecution-but best to cover any possibilities. I’ll officially change my address to Kohu-Kohu when we get a small building up on our land. Have rigged up separate bedrooms (ostensibly) for A- in the meantime - Important to retain ones own income! The trust have applied for a grant to cover the cost of a typewriter & part time wages for 2 workers-I could get $42 p/w to co-ordinate the news letter.” Another similar letter addressed to the family begins; “Hello folks, please pop this enclosed letter in the box immediately. It is the renewal of my benefit. Remember: should Social Welfare contact you (they may phone) tell them I am still living at Caroline St. Thanks”

12. The offences disclosed by the above need no explanation. Copies of the original documents have already been provided to you and verified by the court as having been authored by the trustee.

13. Obviously after this information was referred to the authorities it would be highly unlikely that the trustee could remain impartial in her dealings on my behalf.

14.  Indeed if creditors had surrounded me as my mother has been led to believe, my entire inheritance would have been purposely shredded by those tasked with looking after my best interests.


The Official Assignee

15. The Assignee allowed the proof of debt and I was bankrupted in March 2004 over an estimated $8,000 in Court costs.

16. The debt was resolved after a family protection claim was taken by the assignee and I was awarded a clear one third share of the estate

17. However after 3 years of litigation the result was essentially the same as my original claim for an equitable share of the estate. The only difference was that I’d claimed my mother had been induced to change her will, rather than breaching a moral duty to me as found by the Court.

18. The Assignee rejected my claim that my mother was unduly influenced despite the fact that the bankruptcy established that I had had no other creditors other than the trustee. This resulted in the executor of a protective trust being allowed to use the funds of the estate to bankrupt the legatee, which was the antithesis of the stated purpose of the trust.

19. On 11 May 2006, the protective trust was replaced with a direct share of the estate dating back to the execution of the will. Notably, the finding that the trust was a protective trust designed to protect me, rather than simply discretionary as argued by the trustee, indicates that the decision of the trustee to take the bankruptcy proceedings was with reckless disregard for the sanctity of that trust.

High Court Decision

20. I have attached a copy of the decision, the outcome of which reflects the offer I made to settle before any proceedings were ever instituted.

21. This decision was not appealed and my criticism is directed at the process rather than the outcome. This process failed to:

 Provide the beneficiaries with an unbiased honest trustee

 Allow the cross examination of affidavit evidence

 Order disclosure of core trust documents

 Consider legitimate grounds to set off the debt

22. One critical factor to consider are the costs of the parties and the liability of the trustees to pay their own costs if occasioned by breach of trust or their failure to provide accurate annual accounts.

23. This decision ordered that the third share I was entitled to dated back to the execution of the will. This in turn proves that at the time of the bankruptcy order  I was solvent when adjudicated.

24. Therefore the jurisdiction of the Court to resolve this issue was obtained fraudulently. Appeals were thwarted due to my inability to provide security for costs and the trustees continued refusal to disclose core financials.

25. Had the proper elements of equitable trust law been considered or the facts subject to basic scrutiny, the proceedings described by court as tortuous would not have been necessary..

Legal Issues

26. Matters overlooked by the Assignee or not enforced by the Court include disclosure, the trustee’s ability to bring proceedings before probate and the right of set-off in relation to mutual debt. Briefly the crucial points are as follows;

27. Disclosure As far as English law is concerned, the general principle was stated in O’Rourke v Darbishire [1920] AC581-   

13 “The beneficiary is entitled to see all trust documents because they are trust documents and he is a beneficiary. They are in this sense his own. Action or no action, he is entitled to access to them. This has nothing to do with discovery. The right to discovery is the right to someone else’s documents. The proprietary right is a right to access documents which are your own.”

28. The trustee’s ability to bring proceedings before probate is doubtful and referred to at page 462, s19.2 of Nevill’s Law of Trusts, Wills and Administration (9th ed) which describes the Nature of Office ( abridged)

 i. For, instance, the executor can commence an action, although probate must be obtained before the date of hearing. Re: Masonic and General Life Assurance Co.(1885)32ChD 373.

 ii. In fact the executor can do anything that could be done after probate, up to the point where someone with whom he or she is dealing requires proof of title. Then he or she must obtain probate. Thus, if a debtor refuses to pay his or her debt to an executor acting without a grant of probate, The Court will stay proceedings until a grant is obtained. Re: Tarr v Commercial Bank of Sydney (1884) 12 QBD 294.

29. You will note the large body of well-settled equitable precedent in relation to the power to set-off and the development of law in this field arising from the need to avoid unnecessary proceedings. The trustee’s right to set off is referred to in Equity & Trusts in New Zealand ISBN 0-86472-354-7 at page 154.

"A trustee may usually set off money due to him or her from the trust estate against money owed to the trust estate by him or her for example in McEwan v Crombie (1883)25 Ch D 175  there were two trustees, one of whom was bankrupt. The bankrupt’s estate owed money to the trust. The trust estate owed money to them both. The amount due to the bankrupt was set off against the sum due from the estate. However where a trustee has two trust funds for the one beneficiary and the beneficiary owes the money to one fund, the trustee cannot refuse to pay over the other fund. In re Bruce [1908] 2 Ch 682 (CA).”

30. Finally there is the statute law that I seek codified into New Zealand Legislation. This clearly provides for the set-off of mutual debts. The Assignee had an obligation to consider the provisions of the Set-Off Act under s3(4) of the Insolvency Act 1967 which provides “the  rights and powers under other Acts are not affected. The Assignee has the power to, subject to the provisions of this Act, to avail himself of all rights and remedies provided by any other Act or rule of law in addition to the rights and remedies provided by this Act”.
Set- Off Act 
13 Mutual debts to be set one against the other
Where there are mutual debts between the plaintiff and defendant, or if either party sue or be sued as executor or administrator where there are mutual debts between the testator or intestate and either party, one debt may be set against the other, and such matter may be given in evidence upon the general issue, or pleading in bar, as the nature of the case shall require, so as at the time of his pleading the general issue, where any such debt of the plaintiff, his testator or intestate, is intended to be insisted on in evidence, notice shall be given of the particular sum or debt so intended to be insisted on, and upon what account it became due, or otherwise such matter shall not be allowed in evidence upon such general issue.  

Please contact me should you require copies of any of the documents referred to herein.